Tax Law Changes : Tax-Year 2006 Businesses

Depreciation and Section 179 Expense

Increased section 179 limits. The maximum section 179 deduction you can elect for property you placed in service in 2006 is increased to $108,000 for qualified section 179 property. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $430,000.

Self-Employment Tax

The self-employment tax rate on net earnings remains the same for 2006. This rate, 15.3%, is a total of 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

The maximum amount subject to the social security part for tax years beginning in 2006 has increased to $94,200. All net earnings of at least $400 are subject to the Medicare part.

Social Security and Medicare Taxes

For 2006, the employer and employee will continue to pay:

6.2% each for social security tax (old-age, survivors, and disability insurance), and

1.45% each for Medicare tax (hospital insurance).

Wage limits. For social security tax, the maximum amount of 2006 wages subject to the tax has increased to $94,200. For Medicare tax, all covered 2006 wages are subject to the tax. Circular E (Publication 15), Employer's Tax Guide, has more information about these taxes.

Upcoming Tax Dates

August 10 — Employees who work for tipsIf you received $20 or more in tips during July, report them to your employer - Details

August 10 — Social security, Medicare, and withheld income taxFile Form 941 for the second quarter of 2015. This due date applies only if you deposited the tax for the quarter timely, properly, and in full.

August 12 — Communications and air transportation taxes under the alternative method. Deposit the tax included in amounts billed or tickets sold during the first 15 days of July.

August 14 — Regular method taxesDeposit the tax for the last 16 days of July.

August 17 — Social security, Medicare, and withheld income taxIf the monthly deposit rule applies, deposit the tax for payments in July.